During the past three years, the myth that Montenegros fate is inextricably linked to that of Serbia has suffered serious blows. Among the arguments in its favour, in particular the notion that the small mountainous republic would succumb to famine without Serbian grain proved wildly incorrect. The establishment two years ago of frontier controls at Brodarevo [on the Serbian-Montenegrin border] merely encouraged Montenegro to turn to other markets, so that it survived to the chagrin of Serb nationalists in both Montenegro and Belgrade. It was above all this border barrier, indeed, that allowed Montenegro to discover its suppressed potential and begin its economic recovery.

Following its political break with Belgrade, Podgorica assumed many of the functions that had been surrendered to the federal authorities, including control of foreign trade and customs and monetary policy. There is no doubt, however, that in the forthcoming difficult negotiations with Serbia regarding Montenegros status, supporters of the common state will demand that this process be reversed, and that the economy once again become a joint concern. One of the first moves of the new Belgrade government was to lift the controls on the Serbian-Montenegrin border. This was followed by demands that Montenegro should show good will, perhaps by giving up some of the economic freedoms it had won. Serbian pressure for a single market, a single customs and import-export regime, is bound to intensify in the future. What are the implications of this for Montenegro?

Forward not back

Discreet warnings have come from the Montenegrin political establishment that one should not rejoin a state that is practically defunct and re-embrace the solutions it used to offer. The economists, by contrast, are far more forthright. According to Branimir Pajkovic, director of the Euro-Market Bank, Montenegros first foreign bank, Montenegro ought to bear in mind the complexity of the problems faced by the new Serbian government in domestic and foreign affairs. It should not overlook the paternalism traditionally displayed towards it by the majority of the democratic forces composing the Serbian government in formation. Because of this and, more importantly, given the state of the Serbian economy, Montenegro rather than heading back should accelerate the process initiated a few years ago of economic and political reform based on the rejection of Belgrades economic policies. Montenegro has considerably liberalised its foreign trade, cut import duties and removed the limits with which Serbia has protected its economy.

As Rade Ratkovic, professor at the Faculty of Tourism in Kotor, explained to Monitor: The victorious Belgrade is planning to constitute with an inferior Montenegro federal state organs that are bound to neglect our essential economic interests. For Montenegro political unitarism means total economic impoverishment. Dr Ratkovic insists that the lifting of the Serbian economic blockade should not prevent Montenegro from seeking to regulate its trade with Serbia in the same manner as with other former Yugoslav republics, i.e. on the basis of a convertible currency. The dinar has its own long and sad history, and it is one of the worlds weakest currencies. Who can guarantee us that there will not be other attempts to misuse the dinar? Quite apart from this, it is clear that the dinar simply has no future. Our future - as well as that of Serbia - lies in our integration into the European trade area.

The Montenegrin economists are warning that a full economic union with Serbia would prevent Montenegro from realising its comparative advantages, and that the two republics economies and resources are essentially incompatible. While Serbia will wish first to renew and then to protect its heavy industry and parts of its agriculture by way of import duties, Montenegro needs a liberal trade policy in order, in particular, to encourage its tourism. If we were to tie ourselves exclusively to Serbia, as was the case in the past, our tourism would simply die out. During the time we spent in sole company with Serbia there was a real explosion of weekend apartments, transforming our tourist capacities into oases of cheap weekend settlements. It is clear that in a common state tourism would not be an important economic branch for Serbia, which therefore would not concern itself with its development - something that is of the greatest importance for us. This is true also for other sectors of the economy, e.g. agriculture: if we were to remain with Serbia, we would fall victim to an agricultural policy that would be in its interest rather than Montenegros, which is what used to be the case in the former Yugoslavia, says Dr Ratkovic.

Opening the borders

The closure of the border with Serbia has forced Montenegro to open its borders with its other neighbours; in so doing, it has become an important transit centre for goods destined for countries such as Albania, Bosnia-Herzegovina, Croatia, etc. The arrival of KFOR in Kosovo, in particular, permitted Montenegro to put to good use its communication network, beginning with the port of Bar, and to collect high transit taxes.

This is the moment, Professor Ratkovic argues, for Montenegro to insist on the opening of its borders. One of its most important concerns should be the building of the Adriatic highway, which would make Montenegro the quickest route for Albania, Greece and beyond to the Middle East. Albanias opening to the outside world has indeed transformed Montenegros position. Despite our difficult situation, caused by the blockade of our borders by the army under Miloevics command, we have managed significantly to restore our trade with the former Yugoslav republics. We have also established good contacts with other foreign partners, despite the economic sanctions. What has happened in the last few years, in fact, is nothing but a return to the situation that pertained before our entering into an exclusive union with Serbia. One should recall that in the former Yugoslavia only 20% of Montenegros trade was with Serbia and 80% with other Yugoslav republics.

The renewal of economic ties with these republics is not as yet fully institutionalised, however. Montenegro needs political and economic conditions which would permit it to establish bilateral and multilateral relations with the other republics of former Yugoslavia, without having to wait for Serbia to resolve its complicated disputes with them. Serbia will have to confront the truth about the war and about the war crimes committed on the territory of the former Yugoslavia. Although Montenegro did for a number of years follow Belgrades lead in the pursuit of war and the crimes associated with it, its mortgage in this regard is not so heavy, given that all command posts were located in Belgrade.

Avoiding Serbias problems

Serbia has the obligation to heal the wounds caused by its expansionist wars. According to Professor Ratkovic, these wounds are both political and economic in nature. It will take a long time before the West ceases to be the enemy in the Serbian political consciousness. Serbia will have great problems with the other republics in regard to the issue of succession. The question of war reparations will also be posed. It is logical to ask why Montenegro should have to wait for Serbia to solve all its problems, while remaining a junior partner in a union in which Serbias interests would predominate. Branimir Pajkovic also believes that Serbia faces enormous difficulties. Serbia will have to return billions of dollars associated with the property it retained in its attempt to present itself as the only successor of SFRY; and this will become clear as soon as it enters into negotiations with other former Yugoslav republics regarding the succession. Montenegro, however, has hardly any obligations of this nature. Those that it does have are insignificant in comparison with those of Serbia. This is also true for the foreign-currency savings accounts held by its citizens, and for the debt owed to international banking associations, such as the London Club, which at the end of the 1980s had been re-scheduled by way of the National Bank of Yugoslavia. According to Pajkovic: All the former SFRY republics have regulated their obligations in this regard, which means that what remains of the debt guaranteed by the National Bank of Yugoslavia belongs only to Serbia and Montenegro. So far as I know, Montenegro has been able to buy back around 130 million dollars of what was an exceptionally high debt, thus reducing it to an amount equivalent to the income generated by one successful year of the tourism characteristic of the late 1980s.

Pajkovi points out that Montenegro, unlike Serbia, has over the past year also developed intensive contacts with the outside world. There are indications that the Washington-based International Bank for Reconstruction and Development, as well as its London-based European counterpart, will grant Montenegro additional means to renew its economic infrastructure. The European Investment Bank is also considering mechanisms which would translate EU support for Montenegro into concrete loans for projects of common interest. Serbia, on the other hand, still has to establish such relations, and this will be done under strict conditions imposed by the international community, such as cooperation with the war-crimes tribunal in The Hague and normalisation of its complicated relations with the former Yugoslav republics, including the issues of succession and war reparations. Quite apart from this, as our interlocutors stress, the process of Serbias integration into the international community will be slowed down by the fact that it must achieve its reconstruction before it can begin to develop. Montenegro, on the other hand, has nothing that needs reconstructing. Its industrial resources are devastated, but they have not been destroyed by NATO bombs. Due to its small size, moreover, the Montenegrin economic system is far more flexible than that of Serbia and will need much less money to regain its competitive edge.

Our priorities, Pajkovic concludes, are different from those of Serbia. We have already solved many of the painful problems that are still awaiting Serbia, such as the attitude to the dinar and inflation, and the relationship with our neighbours and with the international community - issues that still excite great hostility among the Serbian political parties and in the public at large, not to speak of the hatred felt towards the NATO member states. Another important problem facing Serbia is that of its political consolidation and moral renewal: recognition of the crimes and errors committed, clarification of the close ties that exist between the authorities and organised crime, and many other such things.